China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy

China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy as it heads towards its slowest expansion in nearly a quarter of a century.

The cut, the first in over two years, came as factory growth has stalled and the property market, long a pillar of growth, has remained weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel.

"It's comes right after China's disappointing PMI figures showing that manufacturing activity is getting dangerously close to contraction," said Alexandre Baradez, chief market analyst at IG in Paris, referring to a private factory survey this week which added to worries about slowing global growth.

"China's central bank is now following the path of the Fed, the ECB and the BoJ. Central banks are really driving markets," he said.

Just a few weeks ago, Chinese President Xi Jinping had assured global business leaders that the risks faced by China's economy were "not so scary" and the government was confident it could head off the dangers.

© REUTERS/Jason Lee The headquarters of China's central bank, the People's Bank of China, is pictured behind an iron chain in Beijing, June 21, 2013. In a speech to chief executives at the Asia Pacific Economic Cooperation (APEC) CEO Summit, Xi said even if China's economy were to grow 7 percent, that would still rank it at the forefront of the world's economies.

The People's Bank of China said it was cutting one-year benchmark lending rates by 40 basis points to 5.6 percent. It lowered one-year benchmark deposit rates by less - just 25 basis points. The changes take effect from Saturday.

"The problem of difficult financing, costly financing remains glaring in the real economy," the PBOC said.

LIMITING THE IMPACT

The central bank also took a step to free up deposit rates, allowing banks to pay depositors 1.2 times the benchmark level, up from 1.1 times previously.

"They are cutting rates and liberalising rates at the same time so that the stimulus won't be so damaging," said Li Huiyong, an economist at Shenyin and Wanguo Securities.

Recent data showed bank lending tumbled in October and money supply growth cooled, raising fears of a sharper economic slowdown and prompting calls for more stimulus measures, including cutting interest rates.

But many analysts had expected the central bank to hold off on cutting interest rates for now, as authorities have opted instead for measures like more fiscal spending, as they also try to balance the need to reform the economy.

Chinese leaders have also repeatedly stressed they would tolerate somewhat slower growth as long as the jobs market remained resilient.

More recently, the central bank injected cash into the system in the form of short-term loans to banks in an attempt to keep down borrowing costs and encourage more lending even as bad loans increase.

But a growing number of economists said those moves were not translating into either lower financing costs or more credit for cash-starved Chinese companies.

Analysts expressed doubts over whether the impact of the rate cut would find its way into the real economy, either, as the cooling economy makes lenders more risk-averse. Some predicted multiple cuts would be needed well into next year.

Hurt by the cooling property sector, erratic export demand and slackening domestic investment growth, China's economy is seen posting its weakest annual growth in 24 years this year at 7.4 percent.

China's rate move comes after the Bank of Japan sprang a surprise on Oct. 31 by dramatically increasing the pace of its money creation, while European Central Bank President Mario Draghi shifted gear on Friday and threw the door wide open to quantitative easing in the euro zone.

"There is definitely more concern around about the state of the global economy than there was a few months ago, you see that not just when you talk about Europe," British finance minister George Osborne told an audience of business leaders in London on Friday

Peru's GDP growth will be world's second-highest in 2014 #peru #china Peru’s rapid GDP growth will only be topped by China.

Peru is likely to post the second highest GDP growth rate in 2014 and 2015 in the world after China, according to the latest report of the Latin Focus Consensus Forecast, a major source of global economic analysis.

The report noted Peru’s Gross Domestic product would expand 5.4 this year and by 5.6 percent in 2015 while China would grow 7.5 and 7.4 percent this and next year, respectively.

Moreover, Peru’s economic activity is forecast to surpass the average annual growth rates of the two economic blocs in the region: the Southern Common Market (Mercosur) which will expand 1.7 and 2.2 percent in 2014 and 2015, respectively and the Andean Community (CAN) with 4.8 and 4.9 percent growth this and next year.

Economists of the consulting firm estimate the Andean country will post the third lowest inflation rate in the region this and next year at 2.5 percent within the central bank’s target of 1-3 percent.

Peru’s rapid GDP growth will only be topped by China.

China Yuan Down Big , After Hitting Modern-Era Intraday

China's yuan fell sharply against the U.S. dollar late Monday afternoon after the Chinese currency hit a modern-era high earlier in the session, amid the dollar's rebound in offshore markets and signs of intervention from the Chinese central bank.




On the over-the-counter market, the dollar was at CNY6.7758 around 0930 GMT, up from CNY6.7711 Friday, which was the yuan's highest settlement level against the dollar since the 1980s, before the currency was allowed to be regularly traded as part of China's market-oriented reforms.



The yuan had a strong start Monday and in mid-afternoon trade hit CNY6.7676 against the dollar, the Chinese currency's highest intraday level in the modern era.



However, a wave of selling in the last trading hour dragged the yuan down to an intraday low of CNY6.7766 to the dollar, amid signs of strong dollar buying by the People's Bank of China via the automatic price-matching system.



"I think the central bank is sending a signal that it doesn't want the yuan to appreciate further in the near term," said a Shanghai-based foreign bank trader.



The price-matching system is a little-used anonymous trading platform that dealers believe the PBOC uses on occasion to signal its intentions to the market, while not officially showing its hand.



"The central bank has expressed its intention through today's higher dollar-yuan central parity but the market continued to buy the yuan earlier today as we wanted to know how much the central bank would let the yuan rise," the trader said.



The PBOC set the session's dollar-yuan central parity rate moderately higher at 6.7733 from Friday's record low of 6.7720, even though the dollar continued to weaken against the euro Friday.



"The higher central parity rate today may be signaling the central bank doesn't want the yuan to rise too quickly given the gains last week," said a Shanghai-based trader at a local bank.



The yuan has appreciated 0.74% against the dollar since the central bank announced on June 19 a decision to drop its nearly two-year-old currency peg to the dollar and promised to make the yuan exchange rate more flexible.



The dollar's slight rebound against the euro and yen also capped further gains in the yuan, traders said.



The euro was at $1.2530 at 1022 GMT, down from $1.2543 in late New York trade Friday.



Traders said room for any future yuan appreciation may not be large, as shown by lackluster trading in the offshore dollar-yuan nondeliverable forwards market of late. Mad Money w/ Jim Cramer T-Shirt



"The offshore NDF market shows foreign investors don't believe there's room for large yuan appreciation in the near term," said another Shanghai-based trader at a local bank.

China Currency at highest Level in Nearly Two Years........

Chinese currency strengthened Monday to the highest level in nearly two years in the biggest one-day move since 2005, an early indication that China would allow a gradual rise in the renminbi that it had hinted at over the weekend. Officials from Japan to Thailand to Germany on Monday hailed China’s pledge Saturday to “proceed further with reform” of the exchange rate and “enhance” flexibility as a potential boon to their exports and national economies. Many economists believe the stronger renminbi will increase the purchasing power of ordinary Chinese citizens and companies, helping promote global trade in one of the world’s largest markets.
But China on Monday continued to play down the significance of the renminbi’s value in helping to re-balance the global economy. A commentary in the state-run China Daily placed the onus on global leaders to overhaul the global financial system.
If leaders don’t to make progress at a forthcoming Group of 20 summit to overhaul the financial system, “the international community will soon find to its disappointment that its leaders look only for red herrings, rather than real solutions, at a time when true leadership is badly needed,” the commentary said.
By the close of business in Asia, the renminbi had advanced 0.42 percent to 6.7976 per dollar. Though seemingly small, the one-day gain is the largest in five years and marks an extraordinary change in China’s currency stance. China has hardly allowed the currency to budge over the past two years as it tried to promote its exports during the global economic and financial crisis.
At the same time, the announcement triggered an across-the-board rally in Asian and European equity markets as investors cheered the political and economic implications of the move.
The key market indexes in mainland China and Hong Kong rallied 2.9 percent and 3.1 percent, respectively, and the Nikkei 225 index in Japan closed 2.4 percent higher. European markets also were higher by midday.
Mainland Chinese airlines were among the biggest gainers in Shanghai: China Southern Airlines soared 8.1 percent, China Eastern jumped 5.6 percent, and Air China rallied 6.4 percent.
The reason: Investors believe that a rise in the Chinese currency will ultimately bolster passenger and cargo business while reducing airlines’ fuel costs. Because oil is denominated in dollars on the world markets, a rise in the renminbi would make oil cheaper for Chinese purchasers.
Oil also rose on expectations that a stronger renminbi will bolster demand from China. U.S. crude for July delivery rose $1.69 to as high as $78.87, its highest level since early May.
China’s announcement stopped well short of an all-out revaluation for the Chinese currency and provided little detail as to what the added flexibility for the renminbi would entail, or when it would be introduced.
And in a sign that underscored that the authorities in Beijing are in no hurry to initiate marked reform — a step that might fuel criticism at home that they were succumbing to pressure from abroad — the central bank on Monday left its reference rate for the currency unchanged from Friday’s level, at 6.8275 per dollar.
Officially the renminbi is allowed to trade as much as 0.5 percent below or above Beijing’s daily reference rate to the dollar, but in reality the divergence from that level has been much smaller over the past two years.
Monday’s gain showed a striking hands-off attitude on the part of Chinese authorities who manage the exchange rate. But analysts will closely watch Beijing’s announcement Tuesday morning of its daily reference rate to get a better sense of how swiftly China will allow financial markets to determine the renminbi’s level.
The weekend’s statement and Monday’s gains in the currency were widely interpreted as a precursor to a gradual and modest appreciation of the renminbi, which has been informally pegged against the dollar since the middle of 2008.
That policy has caused political tensions with the United States: Many economists and U.S. policy makers believe that the renminbi exchange rate is artificially low, giving Chinese exporters an unfair competitive advantage over U.S. manufacturers.
Saturday’s announcement, coming just days before the G-20 meeting of world leaders in Canada later this week, appeared aimed at defusing the currency debate and shifting the focus of the meeting toward other issues, like Europe’s debt troubles, analysts said.
The renminbi is a political tool. Clearly the timing of the move was politically determined. It is not an economic tool yet. This will take years, not days or weeks,” Bill Belchere, a global economist at Mirae Asset in Hong Kong, wrote in a note Monday. He added: “This is a move in the right direction: politically and economically. Market disappointment may grow if China’s actions remain slow and don’t add up to real shift in policy. But the verdict is out.”
Economists at Bank of America Merrill Lynch echoed this, writing in a note that although they did not expect a significant appreciation against the dollar, Saturday’s announcement was a “key step for Chinese macro policy.”
Foreign exchange flexibility would help China to control asset price bubbles and reduce the threat of protectionism, economists believe.
The stock markets took the news unequivocally well, shrugging off both the lack of clarity on the timing and likely small size of any actual appreciation.
Most analysts expect Beijing to allow an increase of between only 2 percent and 5 percent by the end of the year. A Reuters survey Monday showed that economists broadly expected the renminbi to end 2010 at 6.67 per dollar.

In addition to China and Japan, major indexes elsewhere also gained, with rises of 1.8 percent in Singapore, 1.9 percent in Taiwan and 1.6 percent in South Korea. The Sensex in India was 1.7 percent higher in late trading, and the benchmark index in Australia closed up 1.3 percent.
Consumer goods companies and overseas companies that export their goods and services to China are seen as the biggest winners of a stronger renminbi.
The Swiss watch maker Swatch rose 5.6 percent by early afternoon in Europe, and the French luxury groups LVMH and Richemont climbed 3.2 percent and 4.6 percent, respectively.
The exact impact on companies will depend to a large extent on how much they export to and from China and whether they have manufacturing operations there.
Longer term, analysts said, a renminbi appreciation could have far-reaching macroeconomic implications.
An appreciation of the renminbi against the yen is “clearly good for Japanese companies that stand to benefit from growth in the Chinese market,” analysts at Nomura wrote in a note on Monday, though they added that it also would have some negative implications for Japanese companies that have manufacturing operations in China and that export to other regions.
The Japanese finance minister, Yoshihiko Noda, said he expected the move “to be a plus for the China and Asia economies as well as the world economy. Basically I welcome it,” Reuters reported.
And Bandid Nijathaworn, the deputy governor of the Thai central bank, said gains in the renminbi, also commonly known as the yuan, would buoy exports to China and help reduce trade imbalances in the long term. “China is a Thai export market. If the yuan strengthens and our exports can still compete with others, we should benefit,” he said, according to Reuters.ny.times.com

Can Google Take on Godzilla ( China ) ?? ( GOOG,BIDU ) Barron's

HOW DO YOU SAY, "DON'T BE EVIL" IN MANDARIN? The answer: You can't, if you happen to be within earshot or eyeshot of the Beijing apparatchiks. Who would ever have thought that simple and rather bland admonition would trigger a confrontation between the world's two greatest powers, China and Google?

In fact, much as it grieves us to say so, it was all Google's fault. For the company had the effrontery to demonstrate that its corporate motto wasn't just a bit of inspirational fluff but actually was supposed to be, of all things, pertinent to its business practices. We know that Larry Page and Sergey Brin, who founded the company, are still youngsters as moguls go, but, really, who ever dreamed they'd be so naive as to try to live up to a smiley slogan?



When you get down to it, Google (ticker: GOOG) refrained from setting the behavioral bar too high. We mean, it doesn't urge either its management or its employees to be good, just to abstain from inflicting harm. And, as carpers fell all over each other in a rush to point out, the company hasn't always been on the side of the angels in its business tactics, and it did agree to bend to censorship when it entered the market four years ago.



To which we say, so what? Perfect isn't the point; summoning up the courage to stick your tongue out at blatant and treacherous abuse of power is.



"Don't be evil" seemingly doesn't lend itself to easy translation. Earnest attempts to do so by the Chinese somehow yielded only pornographic cuneiform that, regrettably, we can't pass along because it has no place in a family magazine. (Nor, we might interject, does porno video on the Internet, which, if we understand it correctly, is the official excuse for shutting down Google's YouTube site in China. We confess, it never occurred to us that was why YouTube is so popular.)



Clean living obviously ranks second only to party loyalty in the Chinese catechism. So the Sino cybernauts had no choice but to launch an attack on Google's computer systems to make sure everything on those systems was, by the ruling clique's lights, "kosher" (sorry, we don't know how you say that in Mandarin, either).



What they were particularly interested in were the identities of those bothersome pests, the dissidents, who are inclined to post all kinds of subversive messages online promoting such blasphemous notions as the Communist bosses don't know best about everything. Imagine! Just the sort of dangerous ideas that can make the natives restless, a rather disturbing prospect when you're talking a billion-odd natives.



And, of course, the authorities are so keen on discovering just who those dissidents are simply because they're eager to reason with them, and gently persuade them of the error of their ways. The persuasion process might take eight or 10 years, but, hey, what's the hurry? After all, the misguided activists are guaranteed three squares (or at least three slivers) a day and a whole 10 minutes in the exercise yard. If you happen to be in the neighborhood and listen carefully, you can hear them holler for joy.



Nor was Google singled out. All told, something like three dozen American companies were attacked on the odd chance they might have some data or info worth appropriating. Besides "don't be evil" and "kosher," the phrase "intellectual property" seemingly is alien to the Chinese lexicon.



Whether Google decides to act on its threat to pull out of Beijing refuses to curb its appetite for censorship, we'll find out in the weeks ahead. But just by making a public fuss over the invidious intrusions and the stifling grip of censorship, the company merits a big thumbs-up! And that such dispassionate sources as the Chinese government and Microsoft (MSFT), which has designs for its own search engine in the giant Sino market, disagree, merely reinforces our impulse to shout "bravo" to Google.



HOW MUCH THE FESTERING quarrel between China and Google exerted an overall effect on the market admittedly is arguable. Given stocks' abrupt retreat on Friday from 15-month highs set the day before, it's tempting to infer that the fracas, adding to a growing number of contentious issues between the U.S. and Beijing -- on currency manipulation, barriers to the Chinese market that make a mockery of free trade and some scattered retaliatory actions by us, Washington's decision to sell arms to Taiwan and the forthcoming official visit by the Dalai Lama -- raised the specter of a more serious chill in the relations between the two countries and helped cool investor enthusiasm.



More likely, we suspect, Friday's fall was caused by more mundane factors, like disappointing fourth-quarter operating results and some less-than-exhilarating economic reports. At the same time, the latest readings showed mounting optimism on the part of investors, both pros and do-it-yourselfers, usually a sign that, for a spell, anyway, the easy money had been made.



Investors Intelligence, which canvasses advisory services and treats them as an ideal contrary indicator (they're most excited about equities when the market is about to take a spill and most negative when it's poised to go up), found in its latest survey that 53.4% of them were bullish, the highest level since December of '07, not in retrospect the most propitious time to buy stocks. A scant 15.9% were bearish, just a fraction above the 15.6% a fortnight ago, which was a pessimistic low that goes back to April '87, a few months before equities were about to do a historic swan dive.



While for the most part, the public, still nursing its wounds from the portfolio devastation it absorbed in 2008 and early 2009, has not vigorously participated in the great 70% rally from last March's lows, it has begun to get its toes wet of late. That's reflected in the latest soundings of sentiment among members of the American Association of Individual Investors, which recorded 47.4% bullish and 26.9% bearish.



We might note that one sure indicator of at least incipient euphoria is a tendency among some technicians to downplay the Investors Intelligence numbers by contending that the real key is the growing number of those seers who are looking for a correction. No sooner did they run that one up the flagpole than the ranks of those anticipating a correction began to shrink and, besides, as the chaps who run the survey point out, most of the correction group are basically bullish.



YOU CAN'T HELP BUT FEEL just a tad sorry for the poor banks. On the face of it they've never had it so good: borrowing money from the Fed at zero interest and doing all sorts of interesting things with it, like lending it out (sparingly) at 5% and several notches higher, but also playing the runaway market big-time.



Yet they're the target of opprobrium from hoi polloi, who, poor souls, can't grasp that banks, as one of the mightiest of their chieftains recently declared, "do God's work." Of course, no one seems to have inquired, but the god he was referring to was Mammon.



According to a front-page piece in Friday's Wall Street Journal, the 38 top lenders enjoyed a record year in 2009, with revenues taking a great leap forward, to $449.6 billion from $306.2 billion in 2008. And their hard-working or something employees will receive an aggregate of $145.8 billion in compensation and benefits. Laboring for Mammon certainly pays off.



Still, bankers aren't all that chipper these days.



Not only are they reluctant to own up to what they do for fear of being at a minimum verbally assaulted, but they're also smack dab in the cross hairs of the dastardly politicians, who besides regularly scolding leading bankers in full view of the voting pubic, are busily devising ways and means to make them pay for their sins, not least in the form of taxes.



As it happens, banks were prominent losers in Friday's wide retreat and, indeed, they were among the prime causes of the market's turning tail and heading down. There were some reports of inexorably rising credit losses that disturbed investors. And then JPMorgan Chase (JPM), despite a strong rise in fourth-quarter earnings (they quadrupled), came in, as the cliché goes, a bit light in the revenue department.



Even more discouraging so far as investors were concerned, the top brass seemed less than ebullient about Chase's immediate prospects. It's not inconceivable, to be sure, that the big cheeses in banking, in order to cool the public rage and calm down the rabid politicians, are deliberating playing it humble. But, Freud shmeud, the CFO's warning of "cautious outlook, two words," was not a model of reassurance.



Nor was CEO Jamie Dimon wildly encouraging when he reckoned that things might be better in the second half. Which leaves the obvious possibility they might not and, in any event, appears to put a question mark on the five-plus months left in the first half.



As we've said, perhaps ad nauseam, expectations for the banks have far outraced likely results this year. But that's true as well for the market as a whole. To us, anyway, that suggests more disappointments and more reactions like Friday's
by,Barron's

Great new Interview w/ James Rogers On China ! ( Barrons )

Light-Years Ahead of the Crowd: Interview With James B. Rogers, Private Investor
By LAWRENCE C. STRAUSS


JIM ROGERS HAS A SEVERE CASE OF WANDERLUST. The longtime investor and author, whose books include Investment Biker and Adventure Capitalist, also has a new address: Singapore. Rogers recently moved his family to the island state from New York because he wants his young daughters to learn to speak fluent Chinese, which will be crucial in this century, he says.
"We have seen all this before -- bubbles, panics, collapses. And yet, somehow, the world adapts." -- Jim Rogers
It fits that Rogers, a former member of the Barron's Roundtable and, with George Soros, co-founder of the Quantum Fund in the 1970s, looks far afield for investment opportunities, both long and short. He remains bullish on commodities but has sold many of his emerging-market holdings. Rogers, 65, doesn't run others' money these days, though an index he developed in the late 1990s, the Rogers International Commodities Index, has been licensed to some funds. Its cumulative return, from inception in 1998 through the end of March, was more than 380%, versus about 38% for the S&P 500.
In a recent conversation with Barron's, Rogers had no shortage of strong opinions on topics ranging from regulation of the financial markets to China's future.
Barron's: You've set up house in Singapore. Why the big move?
Rogers: I wanted to move to a Chinese-speaking city because we have a 4-year-old daughter who speaks Chinese. I want to make sure she continues to speak Chinese. We now have another daughter, 4 weeks old, and we want both of them to grow up speaking Chinese fluently. If I'm right, the best skill I can give them is to be completely fluent in Mandarin.
Why not live in China?
The pollution is so horrible and, at least in the cities where we wanted to live, we just couldn't bring ourselves to move there. Singapore is a terrific place. They don't speak as much Chinese here as we would like, but they speak plenty of it.
Why are you so bullish on China?
China is going to be the next great country. The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China. Even if I'm wrong, there are 1.5 billion people who speak Chinese every day, so it's not as if our daughter is learning Danish. Even if she winds up working in a Chinese restaurant, she is going to be the maitre d' -- not the dish washer.
What else intrigues you about China?
China was in decline for 300 years and then around 1978 Deng Xiaoping said, "OK, let's find something new." He reintroduced entrepreneurship and capitalism to a country that has had a long, long history of both. In China they save and invest more than 35% of their income; in America we save less than 2%. The Chinese work from dawn to dusk. When they come to work, they don't say, "How many holidays do I get?" They want to live like we do in America and they are willing to work hard, save and invest for the future.
What about investment opportunities in China?
Perhaps the safest investment is the renminbi, the Chinese currency. I don't see how the renminbi should not go up against the dollar, anyway, for the next several decades. Commodities, of course, are a great way to invest in China. If you have nickel, they will take you to dinner, pay for dinner and pay you on time. They have to buy commodities. And there are some industries in China that are going to do well, no matter what happens to the world economy -- water treatment, for instance. China has a horrible water problem that it is doing something about.
What other industries in China look interesting?
Agriculture. Mao Zedong [who ruled China from 1949 until his death in 1976] totally ruined agriculture. China now is spending huge amounts of money trying to rebuild agriculture. The same goes for power generation. Another growing industry is tourism; the Chinese have not been able to travel for some 300 years, for a variety of reasons. But now the government is making it much easier to get passports, and they are encouraging travel.
Switching to your old home, what are your thoughts on the U.S. credit crunch?
We had the worst credit bubble ever in American history, perhaps world history. I can't remember anytime in history when people were able to buy a house with no money down -- sometimes with no income. You don't clean out a bubble like that in six months to a year. I've been short the U.S. investment banks by using the Amex Securities Broker/Dealer Index [ticker: XBD], an exchange traded fund with exposure to many of those firms. I've also been short Citigroup [C] and Fannie Mae [FNM]. I'll short some more if we get nice rallies in any of them. I am still short some of the U.S. homebuilders like Lennar [LEN].
Anything you like?
The airlines, mainly international airlines like Lufthansa [DLAKY], Austrian Airlines [AUA.Austria], SAS [SAS.Sweden], Iberia [IBLA.Spain], Japan Airlines [JALSY] and all the Chinese airlines. I fly a lot and see that the planes are filling up and that the fares are going up. I also realized that Boeing [BA] and Airbus are sold out and that you can't get a new plane for five to seven years. Rising oil prices are a problem, but the airlines can pass on the cost increases.
You have been quoted as saying you don't think bailouts of troubled companies are a good idea. Is that still your view?
Yes, it is. If the government had not bailed out the hedge fund Long-Term Capital Management in 1998, I don't think we would have some of the problems we have now. Investment banks have been going bankrupt for hundreds of years. It is not the first time something like Bear Stearns [BSC] has happened and the world has always survived.
If you had a few investment bankers go broke in 1998 or after the dot-com bust -- or if they lost hundreds of millions of dollars -- they probably would have had a different approach to their balance sheets. But since relatively few people got hurt with Long-Term Capital Management, in a few months everybody had forgotten the lessons that should have been learned about leverage or crazy products or crazy approaches. The government has been intervening to save all its friends for a decade or so rather than letting the market work properly.
But isn't it so that a Bear Stearns bankruptcy would have devastated the financial system?
If the system is so fragile that the fifth-largest investment bank can bring it all down, then you better go ahead and have the problems now. What if three or five years from now it is the largest investment bank that fails or the largest five or six banks that fail? Then there will be a disaster.
As an investor, you often allude to the importance of understanding history.
History will teach you that, first, we have seen all of this before, whether it's bubbles or panics or collapses. And yet, somehow, the world adapts. It also shows that whatever we are seeing today is not going to be true in 10 years, as was the case with the bubble in technology stocks in the late 1990s. As an investor, it's crucial to figure out what is going to change.
Are we still in the early stages of a bull market for commodities?
I wouldn't say it's early; the commodities bull market started in early 1999. There are going to be corrections -- and big ones -- along the way. That's true for every bull market.
But nobody has brought on any new supply of anything in the past 25 or 30 years. The last gigantic oil field was discovered in the 1960s. The number of acres devoted to wheat farming has been declining for more than 30 years. Food inventories are the lowest they've been in 60 years.
Our colleague Gene Epstein argued in a recent Barron's cover story that there is a huge speculative element pushing up commodities prices.
But where is the oil coming from that's going to drive down prices and keep them down? We are going to have corrections, as was the case in 2001 after 9/11. Is there speculation in commodities? Of course. Whenever you have a bull market, it draws money. If the fundamentals are right, investors make money and they want to make more. But people were buying commodities for 20 years in the 1980s and 1990s and nothing happened, because the fundamentals weren't right yet. Now that the fundamentals are right, more money is going into commodities. It will end in a bubble and hysteria. But in 2018, or whenever this bubble finally starts to peak, if I'm lucky you will call me up and I'll say it's time to sell commodities.
So you expect commodities prices to keep running up.
Absolutely. Look, if somebody discovers a gigantic oil field in Chicago or Berlin, then we will maybe have to start reassessing. But remember that all the great oil fields are in decline, including those in Alaska, Mexico and the North Sea. And I'm not just talking about oil. You can't go into your garage, snap your fingers and bring a new zinc mine to market. It takes on average 10 years to bring on any new mine.
Why have you sold most of your emerging market holdings?
Take Africa as an example. It's a natural- resource-based economy, so a huge fortune is going to be made there in the next 10 years. Many countries will look a lot better because they do have lots of natural resources.
Having said that, right now there are probably 15,000 MBAs on airplanes flying around the world looking for emerging markets, some of which are now called frontier markets. I've been investing in these markets for many years and all of a sudden they have a name. That's why I have sold all my emerging markets except China and Taiwan.
But I hope I'm smart enough that if and when there is a big correction, I'll be able to buy back some of those holdings.
You've been bearish on the dollar for some time -- a good call. What do you have against the greenback?
I continue to be skeptical about the dollar, though I'm not selling dollars at the moment because there are too many bears, including me. I hate to say it but the U.S. dollar is a terribly flawed currency. It seems that the people in Washington are trying to debase the currency. The Fed has been printing money.
When interest rates start rising again in the U.S., won't that strengthen the dollar?
There will be rallies along the way. For every currency that's been under pressure throughout history, that's one of the tools that's used eventually. That causes a rally whenever they do it, but eventually it is just another central bank, or another government, trying to protect itself. Experience tells me that when this scenario occurs, let the rally come and sell more dollars.
In some ways a weaker dollar helps the U.S. economy, making exports cheaper. What's driving the dollar lower?
As recently as 1987 the U.S. was a creditor nation. We are now the largest debtor nation the world has ever seen. We owe trillions. That's with a "t." The real problem is that that our foreign debt is increasing at a rate of $1 trillion every 15 months. You can do the arithmetic.

I think u should have china in your profilo , no more than 20 % !